03132015 Aftermath of U.S. West Coast Port Disruptions: C.H. Robinson Weighs Rug Industry Options

ATLANTA - With so many geo-political events impacting rug imports from the Middle East and Asia, the last thing our industry needed was a nine-month slowdown and threatened strike at U.S. West Coast ("USWC") ports. The Pacific Maritime Association ("PMA") and International Longshore & Warehouse Union ("ILWU") reached an agreement in February, but details raise potential issues and may pose ongoing risks for importers.  RugNews.com asked Francois Wolberg, director, global textile logistics at C.H. Robinson [a $12-billion transportation company familiar with the rug industry] to help clarify the agreement and its long term implications. 

When do you anticipate a return to normal at USWC ports?

We believe it will take approximately 12 weeks from February 20^th when the agreement was reached until the terminals will operate normally. While the terms and conditions are subject to the ILWU member ratification which can take 30 to 45 days, no roadblocks are expected. Productivity has returned to the USWC ports, which was much needed given that vessels had started to idle off the coast. 

What is PMA doing about long lines resulting from the slowdown?

Long lines at the terminal will need to be addressed as dray carriers are paid on the amount of turns they complete, and not how long they wait in line. We do not see an immediate solution as it will require many moving parts to be in sync with one another, including vessel schedule integrity, appointment systems, pier pass, chassis availabilities, etc.  We do know this is being addressed by the terminals, carriers and all stakeholders within the process.   

What are the implications of the trend toward larger vessels?

The industry is evolving and now building and deploying larger vessels to help reduce costs. Newer vessels are designed to burn fuel more efficiently, to hold more containers on a vessel and therefore lower the cost per container. The average vessel that called at USWC ports had been around 4000 to 6000 TEU until 2013. Since then, vessels from 8000 to 9000 TEU have been calling at Los Angeles and Long Beach. The larger vessels being built today are in excess of 18,000 TEU and most are being deployed on the Asia to Europe trade. Many of the vessels we see today on the USWC have cascaded down from Asia-Europe routes.   

How are USWC Ports adapting to the larger vessel size?

USWC ports are adapting to larger vessels by deepening port terminals (LA/LB is deep but other ports on the USWC such as Seattle and Tacoma are now making adjustments). USWC ports are also looking to invest in more cranes to increase the moves per hour as well as purchasing new land to help with the larger number of containers being offloaded. 

Why did ocean carriers exit chassis ownership and what are expectations for the chassis grey pool?

Until 2012, the U.S. had been one of the only countries in the world where shipping lines provided chassis for clients. Most carriers started moving away from this and divesting themselves of chassis beginning in 2013. Chassis are now mostly provided by third party chassis providers. The shipping lines have specific agreements with the pool operators regarding which providers can be used for their containers. This caused a problem as none of the chassis were interchangeable between shipping lines. Now with the grey chassis pool this interchangeability will be allowed which should resolve this problem. Indirectly, it will create a much needed system of efficiencies for the chassis network. 

Should rug importers be concerned about intermodal capacity? 

Intermodal or rail capacity needs review as USWC ports are the primary gateway to the U.S. Midwest.  Right now there is not much option-aside from two major rail lines - or importers to move product from the USWC to the interior of the U.S.  One aspect in particular that needs review is the fact that freight train length is reduced during winter time due to security.  If there is bad weather, this causes further concern and problems. 

What can be done to mitigate potential risk resulting from these issues?

In discussions with importers, route diversity is becoming a theme. While the industry recognizes that the USWC will continue to be the main gateway into the U.S., more and more importers are expecting transportation providers to mitigate the risk of potential disruption by presenting options via Canada, Mexico and the East Coast - at least for the foreseeable future. At C.H. Robinson, we will continue to try and provide customers with routing options which will help alleviate potential supply chain concerns. 

In fact, this April or May we will be publishing a collaborative paper with the Boston Consulting Group on the impacts of the Panama Canal. We believe this will put us at the forefront of thought leadership on the subject.

Note: C.H. Robinsons' information is compiled from a number of sources that to the best of its knowledge are accurate and correct. It is always the intent of C.H. Robinson to present accurate information. C.H. Robinson accepts no liability or responsibility for the information published herein. 

Connect with C.H. Robinson at www.blog.chrobinson.com or www.chrobinson.com for additional information.

03.13.15